Western Europe is forecast to see 1.6% GDP growth in 2019 with Eastern Europe projected to see 2.6% GDP growth in 2019:
The countries that are forecast to see positive growth as it relates to construction activity include Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Ireland, Latvia, Lithuania, Poland, Romania, Slovakia Slovenia Turkey and Ukraine. All of these countries are projected to experience GDP growth of between 2.5% and 4% in 2019. The countries that forecast to be the top performers out of this list are Ireland with 3.6% projected growth, Latvia with 3.8% projected growth, Poland with 3.6% projected growth, Romania 3.6% project growth, Slovenia with 3.8% growth and Turkey with 4.1% projected growth in 2019.
The countries that are forecast to see minimal growth as it relates to construction activity include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. All of these countries are projected to experience GDP growth less than 2.5% in 2019. The countries projected to be the worst performers out of this list include Finland, France, Germany, Italy, Norway, Switzerland and the UK, these countries are projected to see GDP growth rates below 2% in 2019.
Forecasting the European Construction EPC sector is a difficult task, bearing in mind that there are more than 20 diverse countries that all have different traditions and construction related drivers. The construction market forecast for each of these countries fluctuates on politics of each Governments economic policies or on collective European Union mandates.
The UK Brexit exit from the European Union has seen a substantial decline on industrial, infrastructure and commercial construction activity. Brexit negotiations are still in a state of flux, more than two years after the UK referendum, this economic uncertainty is expected to have a negative impact on construction activity in 2019. The economic impact and uncertainty of “Brexit” is still being experienced in the UK, the Pound Sterling has dropped more than 15% against the US Dollar in the last two years, currently trading at $1.26 to the US $ (12/16/2018). The British economy and its’ construction sector continues to weathered the “Brexit” storm and has declined in the last two years. The British housing market activity and pricing in and around London is starting to trend downwards as we move into the 1st Q of 2019. However the jury is still out on “Brexit” – some experts believe it will positively impact the UK construction industry, while there is another group that forecasts doom and gloom for the UK economy. The High Speed Rail Link (HS2) between London and Birmingham (150 km costing $5 billion) is officially a “go”; this four year project is projected to employ as many as 10,000 construction related jobs. Also, a major new nuclear power plant and the 3rd Heathrow runway are a number of major projects that have been announced in the last nine months. Construction costs in the Britain are moving upwards again in the 2.3% to 2.8% range. British Trade Unions are looking for increases in hourly wage rates of between 4% and 6%, if this happens look for inflation and construction costs to start increasing in the 1st half of 2019 and beyond. Overall the UK construction sector is projected to contract in 2019 by 2.5% to 5% due to the uncertainty of the “Brexit” situation. The UK GDP is forecast to grow to 1.5% range in the 1st Q of 2019, the unemployment rate is improving, the current rate is 4.1%, and construction unemployment is higher in the 5.1% to 6.4%. Inflation is projected to be in the 2.2% to 2.6% range by the end of 2019.
Germany is still the #1 country in the EU, if Germany is doing well then the rest of Europe should be performing well, however going into 2019 Germany is not performing to its full potential. The German GDP growth is forecast to be 1.5% by the end of 2019, unemployment is currently 3.4%. Inflation remains low at 2.2%. Germany is the largest economy in the Euro Zone, slow growth appears to be on the cards for the 2019, and German construction activity in 2019 is expected to decline nominally over 2018 levels. The Nord Stream 2 Pipeline Project (a controversial gas pipeline project from Russia to Germany) has recently broken ground.
The “Yellow Vests” riots experienced in November and December in Paris and all across all of France does not bode well for future construction opportunities going into 2019. The French economy is forecast to grow by less than 1.4% for the 1st Q of 2019. Lower energy costs could improve future construction in 2019. The construction sector continues to experience minimal growth; there are a number of major infrastructure / transportation projects in the pipeline, unemployment in France is forecast to be in the 8.7% to 9.2% range in the 1st Q of 2019, the construction sector is experiencing unemployment rates between 10% and 15%, construction escalation is in the 1.8% to 2.1% range.
The majority of countries in Western and Eastern Europe will continue to experience a contraction of the construction sectors in 2019, Brexit, the ongoing Ukraine standoff with Russia will be the reasons for this situation.